Economic Principles and Market Externalities Quiz
Test your knowledge with questions on externality, market failures, public goods, and government intervention in economics.
#1
What is an externality in economics?
A cost or benefit that affects a party who did not choose to incur that cost or benefit
A transaction that occurs outside the market system
A government intervention in the market
A type of market failure
#2
Which of the following is an example of a negative externality?
A beekeeper producing honey
A factory emitting pollution into the air
A homeowner installing solar panels
A farmer growing organic crops
#3
What is the Coase theorem?
A theory stating that markets will naturally correct for externalities through bargaining and negotiation
A theory proposing government intervention as the only solution to externalities
A theory arguing that externalities are unavoidable in a market economy
A theory advocating for complete deregulation of markets
#4
Which policy instrument is often used to address negative externalities?
Subsidies
Taxes
Price controls
Trade restrictions
#5
What is the tragedy of the commons?
A situation where individuals overuse or deplete a shared resource
A market failure caused by externalities
A condition where government intervention is necessary for market efficiency
A theory advocating for the privatization of all resources
#6
Which of the following is a characteristic of public goods?
Rivalry in consumption
Excludability
Non-excludability
Exclusive access
#7
What is the free-rider problem?
A situation where individuals benefit from a public good without contributing to its provision
A condition where government intervention leads to market failure
A theory proposing that individuals always act in their self-interest
A phenomenon where consumers refuse to pay fair prices for goods
#8
What is an example of a positive externality?
A company polluting a river
A person getting vaccinated against a contagious disease
A car manufacturer producing more vehicles
A firm engaging in unfair competition
#9
What is an example of a club good?
A city park
A private beach
Cable television
Public transportation
#10
Which of the following is NOT a type of market failure?
Monopoly power
Externalities
Public goods
Perfect competition
#11
What is the Tragedy of the Anticommons?
A situation where property rights are so fragmented that valuable resources are underused.
A market failure where individuals overconsume a common resource.
A theory advocating for complete privatization of all resources.
A condition where government intervention is necessary for market efficiency.
#12
What is the concept of Pareto efficiency?
A situation where resources are allocated in a way that maximizes social welfare.
A condition where no one can be made better off without making someone else worse off.
A theory suggesting that government intervention always leads to market efficiency.
A phenomenon where individuals exploit common resources for their own benefit.
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